ESCR-Net has elaborated this Statement through the input and review of a broad array of organizations and individuals involved in the efforts of the Network. This statement calls for a response to the financial crisis and economic recession that places human rights norms at the center, in which people and the environment, not banks or business, are at the foundation of economic policy-making. It has been elaborated to contribute to the proceedings at the UN Summit Conference on the Economic and Financial Crisis from 1-3 June, as well as the People’s Hearing on the Crisis to take place on the eve of the UN Summit.
ESCRNet Statement on the Financial Crisis and Global Economic Recession:
Towards a Human Rights Response
1. What started as a meltdown in the subprime mortgage sector in the US in the summer of 2007 has transformed into a systemic economic crisis of global dimensions that most analysts assert is the worst since the Great Depression, deepening already stark levels of inequality both within and between countries. This financial crisis and global economic recession will have severe impacts on the realization of human rights, particularly economic, social and cultural rights. While people in developed countries are feeling the impacts on their standards of living, their jobs and their homes, people in developing countries are bearing the brunt of the crisis, with few safety-nets to protect them from severe poverty and deprivation, and without the fiscal capacity and space to soften the blow.
2. The dramatic decline in aggregate demand globally has led to extensive unemployment and destruction of livelihoods, with harsh impacts on the right to work, especially in poorer countries. Just this year, the ILO calculates that some 51 million people will be put out of work, and wages and working conditions are set to face further downward pressures. Women and their children, the poor, indigenous peoples, ethnic minorities and migrant workers will likely suffer disproportionately. Nearly 55% of women, the ILO also affirms, are set to fall into situations of vulnerable employment this year. Following on the
heels of the food crisis as this is, the right to food is also severely at risk. As poverty increases during the economic contraction, more people will likely be forced to lower the quality or quantity of their diets below the minimum necessary to sustain a healthy life, swelling the number of hungry in the world beyond one billion people, according to the UN. The enjoyment of the right to health is vulnerable in turn as malnutrition makes both adults and their children weak and more vulnerable to disease, with even less chance of meeting the devastating costs of healthcare. The WHO estimates that over 1 billion people already face difficulties in access to health services. The right to education may also be in danger as families cut back their expenditures and withdraw their children from school due to the recession. The long term consequences of the crisis may be even harsher, with life-long effects on children and youth. As public revenues fall, government options to provide core minimum basic services and social protections have become severely limited. Without social protection programs such as unemployment insurance, millions of people may be forced into selling their assets, producing a downward spiral into deeper cycles of debt and poverty, with lasting impacts over generations.
3. If social unrest and the public expression of desperation and frustration is met, as it has already been in some countries, with violent repression by government forces, then civil and political rights will also be threatened by the economic crisis. A rise in xenophobic or otherwise discriminatory sentiment, as some sectors of the population seek to scapegoat others, would also jeopardize the rights of migrant workers and minority groups most vulnerable to discrimination.
4. Yet this financial crisis is not the first to have occurred since 1929. A number of meltdowns have preceded our current one, notably the East Asian crisis in the late 1990s. A clear pattern in all of these crises is evident. Extreme hardships and disproportionate suffering is brought to ordinary citizens, especially the most disadvantaged sectors of society by a situation they had no hand in creating. Yet, those responsible for the financial speculation and lack of government regulations that led to the crisis enjoy impunity.
5. To further compound these differential impacts and lack of accountability, all too often the proposed remedies for financial meltdowns have risked exacerbating the already existing structural inequalities. As many economists have noted elsewhere, economic policies based upon privatization, deregulation and liberalization have overtime led to growing inequality within and between countries. Such inequality has been a central element characterizing our current crisis, with associated patterns of redistribution of wealth towards the private and corporate sector, affecting workers and the poor domestically while creating stark trade imbalances between countries.
6. We concur with eminent economists, such as Joseph Stiglitz, who assert that growth in the financial sector and in GDP are not ends in and of themselves, but exist to serve people’s well-being. What is good for finance and GDP alone is not necessarily good for the economic well-being of all. This financial crisis has profoundly called into question the belief that wealth earned on markets will “trickle down” to all. This systemic collapse calls for a new framework for national governments–both domestically and increasingly at the international level—in which people and the environment, not banks or business, are at the center of economic policy-making.
Towards a Human Rights Response to the Global Financial and Economic Crises
7. We thus call for a response to the financial crisis and economic recession that places human rights norms at the center, in particular those legally binding human rights obligations enshrined in the Universal Declaration of Human Rights and core international human rights treaties. This is not only necessary as a matter of justice, but will make the reforms of the financial and economic system more sustainable and resilient to future crises.
8. A human rights policy response does not presuppose a certain type of economic system, nor preordain detailed trade or financial measures in all contexts. Yet, human rights do provide a clear and universally-recognized framework founded in international law for guidance in the design and implementation of economic policies and programs to address this unprecedented economic crisis. Human rights not only pose limits to oppression and authoritarianism. They also impose positive obligations on States to uphold human rights, especially economic, social and cultural rights. States have the duty to respect, protect and fulfill all human rights (civil, cultural, economic, political and social) at all times, especially in times of crisis.
9. Governments must discharge their duty to ensure minimum essential levels of enjoyment of social and economic rights as a matter of priority, and must also ensure that no deliberately retrogressive measures are taken, by for example cutting essential rights-realizing programs. Unless introduced after very careful consideration of all possible alternatives, existing programs which protect infant and maternal health, provide food assistance for people in hunger, combat preventable diseases and malnutrition, or ensure access to primary education, for example, must in no way be jeopardized by the crisis. Even in the face of public revenue limitations, States must marshal the maximum available resources to ensure that full implementation of economic and social rights is progressively realized in the near and longer-term. States have a specific and continuing obligation to move as expeditiously and effectively as possible towards their full implementation.
10. In addition, the human rights principle of non-discrimination requires that States ensure that all measures adopted in response to the crisis avoid disproportionate effects, and that deliberate, targeted measures are put into place to secure substantive equality of access to basic services across countries and population groups. Disadvantaged members of society must be protected as a matter of priority, even in times of severe resource constraints.
11. Primary human rights obligations of States rest within their jurisdictions. Yet, in the spirit of the UN Charter and applicable international law, States are required to contribute to international cooperation in the full realization of human rights. When acting within inter-governmental fora at the center of this economic crisis, such as the United Nations, the World Bank, the IMF, and or other ad hoc meetings of the G-20, States must guarantee that their policies are consistent and conducive to the realization of human rights. Those States who have enjoyed a more powerful position in decision-making on global economic policies have had greater responsibilities in causing, through their actions and omissions, this global meltdown. This means that they, in turn, carry greater responsibility in the mitigation of the consequences, and in steps needed to assure a just and sustainable way forward.
12. States are obliged to respect the enjoyment of human rights outside their borders, and recuperate their regulatory power to protect against human rights abuses involving third parties, be they business, banks or other non-state actors. Governments must also ensure that human rights standards take primacy over other trade, investment or finance commitments.
13. Lastly, the design and implementation of all economic policies and programs must observe the basic human rights principles of social participation, transparency, access to information, judicial protection and accountability. Participation necessitates that the economic policy-making process is meaningfully rendered open to contest and debate by those affected. Public access to information which affects peoples’ lives in any way must not be restricted, and positive steps must be taken to ensure transparency. Additionally, States must ensure that individuals whose rights have been affected enjoy accessible and effective remedies to seek redress. Those responsible for harms, including private actors, must be brought to justice, and future activities affecting human rights prevented.
REFORM OF DECISIONMAKING PROCESSESS ON ECONOMIC POLICY
14. The crisis facing us today provides an historic opportunity and indeed a generational responsibility to rethink the manner in which decision-making in economic policy has so far occurred. Thus, at the start, a human rights approach calls for a reform of governance structures to ensure that all economic policy at the domestic and international levels be carried out in accordance with the body of standards and principles offered by the human rights regime.
15. Accountability, transparency and participation must be at the heart of the processes to reform the financial system at the national level. Too often, official decisions on the regulation of financial capital flows for example–or the need to dispense with them—are limited to a few “experts,” often including representatives of the private sector industries themselves. This process effectively closes avenues for public participation in fundamental policy and legal discussions affecting all, with particular impacts on the most disadvantaged sectors of society. A human rights policy response would ensure democratic participation at all levels, subjecting decisions to public scrutiny, transparency and accountability at every step.
16. Moreover, principles of accountability and participation in economic policy-making are also impaired when intrusive policy conditions are demanded by international financial institutions and donors, or by inflexible rules in trade and investment agreements. States should be empowered to assert that their human rights obligations take full priority over any other economic, trade or investment commitments.
17. These same human rights principles must be instilled at the international level, where cooperation in the realization of human rights is an obligation of all States, particularly those responsible for harms. Despite the far-reaching consequences of financial policy measures, the inter-governmental bodies setting the agenda and designing financial reforms, such as the Basel Committee on Banking Supervision, the Financial Stability Forum and the G-20, limit participation from the majority of the world. The International Monetary Fund and the World Bank for their part continue to be ruled by principles that confine developing countries to a marginal role, and limit transparency in decision-making. Equally important, other international organizations which have the express mandate to protect human rights are excluded from the design of policy responses. In fact, all indications point to an express effort to sideline them.
18. Therefore, we believe that the United Nations General Assembly, as guardian of the international legal framework, is the most appropriate and most legitimate forum to discuss the reforms that are necessary to restructure the international economic and financial system upon a human rights foundation. Only the United Nations—perhaps assisted by the creation of a Global Economic Coordination Council as recommended by the Commission of Experts established by the UN—has the power to convene all actors in an open, democratic, transparent, non-discriminatory and accountable manner to address the overarching global threats we today face.
BANKING AND FINANCIAL SECTOR REGULATION
19. The ensuing global financial meltdown is not only a consequence of irresponsible and profit- driven behavior of financial entities transferring the burdens of their risks to the most vulnerable in society. Specific government policies designed to deregulate the financial system en masse enabled the permissive environment which lead to our global economic meltdown. Governments— domestically and in concert with others—thus have obligations to adopt policy and legal measures to protect against abuse by preventing banking and other financial sector entities from actions which have the potential to interfere with the realization of human rights. Governments in this regard must strengthen accountability and the rule of law by reigning, for example, in criminal behavior. Where certain acts are not qualified as crimes (i.e. "tax evasion" in certain countries) or as an offense that triggers legal liability, then appropriate legislation should be brought to bear. Further, governments must take serious action to ensure that those individuals and countries affected through no fault of their own attain appropriate remedies to hold those responsible to account and obtain redress.
20. Of all financial sector entities, banks are the most regulated. Yet even so, their behavior has increasingly become ruled by principles of supervision that rely on the banks’ own mechanisms for risk management, rather than independent accountability standards based in law. In response to pressure from industrialized countries, large numbers of poorer countries have progressively adopted these same principles, partly lured by the possibility of attracting international banks. Extreme rules to protect the movement of capital by such banks have also been adopted for the same purpose. Yet, this deregulatory approach used to attract foreign banks has not even had these expected payoffs. In fact, empirical evidence shows no link between liberalized capital accounts and increased economic growth. Large multi-national banks have tended to crowd-out or eliminate the domestic banking sector. The results are clear. Targeted access to credit policies so necessary to battling poverty and strengthening the fulfillment of economic and social rights, especially by the most disadvantaged, have shown little improvement. Furthermore, those countries with the greatest exposure to and dependence on foreign banks are the ones worst affected by this financial crisis. As these financial institutions retreat back to their home countries, refusing to lend in now “fragile” economies, governments themselves lack the access to credit so key to implementing counter-cyclical policies so necessary to reduce the depth and duration of the economic recession.
21. Thus, reforms of the banking sector must preserve the space for national governments to regulate banking services to ensure that they do not discriminate against the poor or disadvantaged, but instead serve the interests of society by ensuring access to credit for all. If state- provided banking services are considered a better option for achieving those purposes, they should be fully employed.
22. The liberalization of capital has also made it harder to engage in progressive taxation of capital flows, further eroding the tax and public revenue base of both North and South by facilitating the shifting of profits from where they are earned to other low - or zero - tax regimes. Governments must then live up to their duties to their people by protecting public revenue sources in a transparent and accountable way, closing tax havens and taking appropriate measures to control the movement of capital and strengthen fiscal accounts.
23. Hedge funds, private equity funds, derivative instruments and credit rating agencies are other actors that have too long been left to their own devices, and which have had profound, measureable impacts on human rights. Hedge funds in many countries have been allowed to become mainstream mechanisms for ordinary citizens to hold their savings, widening the risk to the right to social security. Hedge funds and private equity funds have also forced irreversible restructuring of companies around the world, leading to sudden unemployment and related labor rights violations. Extraordinary profits were also fostered by leverage strategies that relied on tax exemptions on debt financing. This has put sources of public revenue at risk, and limited fiscal expansion possibilities of many governments just at the time they need it most to spur job creation and strengthen social protection measures.
24. Governments in assuming their obligations to international law must work together to discharge their duty to ensure proper redress for victims, and to protect people in the future by adopting all necessary measures to prevent hedge funds, private equity funds, derivative instruments and credit rating agencies, from adversely affecting human rights.
25. Central banks for their part are public agencies and, as part of the government, have obligations to human rights. The principle of central bank autonomy has too often meant independence from real social concerns. It has not however meant freedom from interference by private financial interest groups. Central banks must then recognize that their autonomy does not mean lack of responsibility in serving the interests of society as a whole. Central banks must then balance the need to achieve stable and low inflation with their duties to battle income inequities and stabilize peoples’ employment and means of livelihood through various credit and supervisory instruments.
THE CRISIS IN THE GLOBAL SOUTH
26. Developing countries that for a long time were forced to rely on export-led growth and free market policies are now suffering the most due to the shock in external demand brought by the crisis. Developing countries should be allowed special flexibility so they can fully take into account their human rights obligations as they develop trade policies suitable to deal with the crisis and forestall export-related vulnerabilities in the future. The export profile and strategy chosen by a country—as well as its development plan more broadly—should be carefully guided by human rights concerns. In particular, States in this context should ensure the immediate fulfillment of minimum levels of economic and social rights, in a manner which secures prioritized protection of disadvantaged groups, the non-adoption of retrogressive measures, and the full implementation of these rights in the near and longer-term in accordance with maximum available resources.
27. We note with concern that debt levels are set to rise in developing countries as a consequence of the crisis. Some deficit spending may well be required to expedite recovery and to allow governments to stabilize spending to ensure minimum essential levels of well-being. Yet, history shows that a large debt overhang will impede the fiscal capacity of governments to meet their human rights obligations. Debt cancellation should be considered as a way to increase the fiscal space for governments to undertake spending without further borrowing. In addition, part of the current increases in debt are due to the proliferation of rapid lines of credit by various multilateral finance institutions including the World Bank and the IMF to purportedly help developing countries cope with the crisis. The vast amounts of credit being rapidly disbursed through the IMF, for example, enjoy little or no transparency, with the real risk that the basic norms of public participation, non-discrimination, and public accountability over these funds will be bypassed. Another part of the increase in debt levels results from countries having to refinance debt in stressed private capital markets where funds have become scarce, as developing countries try in vain to compete with industrialized countries in order to fix their troubled banking sectors and implement stimulus plans.
28. The consequences of such indebtedness and their impacts on human rights for the future cannot be ignored. Human rights principles are critical in guiding the assessment of borrowing that needs to be undertaken, the demands that should be met through grants rather than loans, and the accountability and transparency principles that will ensure new lending is engaged in a responsible way, with appropriate social control, so as to prevent the generation of more illegitimate debts future generations will be forced to pay.
29. Some forecast that the budgetary cuts provoked by the crisis, and the shift of funds to fiscal stimulus packages in governments in the global North, will lead donor countries to cut back on their development aid. With the enjoyment of human rights, in particular the social rights of so many people at stake due to the financial crisis, donor governments must not regress on their obligations to international assistance. The economic crisis must not be a justification to cut development aid in any way, and those most responsible for the crisis have certain responsibilities to increasing its unconditioned financial commitments, strengthening the ability of developing country governments to discharge their obligations to avoid regressive measures in the fulfillment of economic and social rights.
HUMAN RIGHTSORIENTED ECONOMIC STIMULUS PACKAGES & PROTECTIVE MEASURES
30. If formulated and implemented upon the human rights standards of transparency, accountability, participation and non-discrimination, economic stimulus packages in those countries where they are possible could go a long way in deterring some of the worst consequences of the crisis in the enjoyment of economic and social rights. Non-discrimination in stimulus packages can be ensured by evaluations of the distributional consequences of the packages across society to make certain equitable benefits are experienced across lines of gender, ethnicity, sexual orientation, and class. Extra measures also may need to be taken to promote substantive equality for those historically disadvantaged. Decisions throughout the life of the stimulus must also be open to question and based on participation and transparency to make certain of robust public accountability. Gender-sensitive policies, for example, should lead to women’s participation in the design and implementation of stimulus packages.
31. One particular area of priority for all governments in responding to the crisis should be the stabilization and strengthening of social protection systems for all, especially the most disadvantaged. The right to social security is recognized in the Universal Declaration of Human Rights and in numerous international human rights treaties, and all States have an obligation to immediately establish a basic social protection system and progressively expand it over time according to their available resources. The strengthening of such systems work to both fulfill the short-term duty to protect people from an economic downturn, as well as contribute to the longer- term economic priority of investing in people.
32. The current crisis presents an historic opportunity to re-structure our broken global economy. It also opens a quickly closing door to reshape our relationship with our environment. Responses to the financial crisis should not lead to a reproduction, but rather to an end of environmentally unsustainable economic patterns. In their effort to stabilize employment and livelihoods, short- term stimulus packages must be very careful not to expand demand to the point of intensifying out- dated and untenable patterns of consumption in rich and poor countries alike. Instead, governments must protect our shared future by living up to this unique opportunity to invest in the long-term need for a low-carbon economy, and to support climate adaptation and mitigation policies based on human rights principles at home and abroad.
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